Suppose that banks had a desired reserve ratio of 4 percent, $12 billion in currency, no excess reserves, and deposits at the central bank of $4 billion. What is the amount of deposits in banks? The amount of deposits in banks is $ billion.
Suppose that banks had a desired reserve ratio of 4 percent, $12 billion in currency, no excess reserves, and deposits at the central bank of $4 billion. What is the amount of deposits in banks? The amount of deposits in banks is $ billion.
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Transcribed Image Text:Suppose that banks had a desired reserve ratio of 4 percent, $12 billion in currency, no excess reserves, and deposits at the central bank of $4 billion.
What is the amount of deposits in banks?
The amount of deposits in banks is $ billion.
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Introduction
Commercial banks are required to keep certain percentage of their total deposits either with themselves or with the central bank. This reserve is kept to meet the demand of the customers. The rest of the money is used by the Commercial banks to create credit in the economy. The minimum reserve requirement is set by the central bank of the country and is revised time to time according to the changes in the economic situations and money supply.
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